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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Suncorp Group Limited (ASX:SUN) is about to go ex-dividend in just 2 days. You will need to purchase shares before the 26th of August to receive the dividend, which will be paid on the 21st of October.
Suncorp Group's next dividend payment will be AU$0.10 per share, on the back of last year when the company paid a total of AU$0.36 to shareholders. Based on the last year's worth of payments, Suncorp Group has a trailing yield of 3.7% on the current stock price of A$9.65. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Suncorp Group
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Suncorp Group is paying out an acceptable 73% of its profit, a common payout level among most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Suncorp Group's earnings per share have dropped 12% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Suncorp Group's dividend payments per share have declined at 1.3% per year on average over the past 10 years, which is uninspiring.
The Bottom Line
Has Suncorp Group got what it takes to maintain its dividend payments? We're not overly enthused to see Suncorp Group's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. Suncorp Group doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
Although, if you're still interested in Suncorp Group and want to know more, you'll find it very useful to know what risks this stock faces. Every company has risks, and we've spotted 3 warning signs for Suncorp Group (of which 1 is significant!) you should know about.